Social Risk in Health Insurance: A Reflection on the Economies of Scale and Scope in Health Insurance

Per‐Johan Horgby and Lars Söderström

Australian Economic Papers, 1998, vol. 37, issue 2, 185-194

Abstract: Social risk causes distortion in the health insurance market. In the presence of social risk, health insurance must be inflated with a safety loading. This implies that policyholder will choose incomplete risk transformation and that health insurers have to build up large capital reserves. By using cross‐diversification and enlarging the insurance pool with other kinds of risk (utilising economies of scope in addition to scale production), the problem of social risk will reduce. It is shown how this is possible by using the capital market as a diversification pool

Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ausecp:v:37:y:1998:i:2:p:185-194

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